Two and a half years ago, Bitcoin crashed. The cryptocurrency fell from a peak value of nearly $20,000 in late 2017 to lows of about $3,200 a year later. The severe drop brought renewed scrutiny of the underlying technology, known as “blockchain,” as well as plentiful I-told-you-sos from critics.
Put as simply as possible, blockchain is a digital ledger on which transactions can be recorded anonymously across decentralized computer networks. When someone receives a Bitcoin, that asset is secured by a transaction ID, a unique string of numbers and letters. Bitcoin was the first, but other cryptocurrencies, such as Ethereum and Dogecoin, have joined the market. Bitcoin was designed as a finite resource—there will only ever be 21 million Bitcoins—that must be “mined” by giving over computer power to the network that secures each Bitcoin transaction. The more computer power granted to the network, the more Bitcoins received as a reward.
After the crash, the idea of a Texas Bitcoin gold rush, in which savvy crypto prospectors would set up giant industrial facilities to mine the currency with high-powered computers, seemed like another burst high-tech bubble. Wired even published a feature story in 2019 about the small town of Rockdale, which sits between Austin and College Station, where a Bitcoin boom and subsequent bust decimated the town’s dreams of renewed prosperity.
Yet, nearly two years later, the boom days seem to be back. So far, nearly 19 million Bitcoins have been mined, worth a total of roughly $1 trillion as of Thursday. It’s understandable, then, that more and more players have joined the effort to mine the remaining 2.3 million Bitcoins. The push to transform Texas’s abundance of rural areas with surprisingly robust and cheap electricity access into Bitcoin mining towns has exponentially increased, driven by the currency’s surge to record levels (as of April 29, one Bitcoin is worth close to $53,000. The high was earlier in April: $63,729.50).
Bitcoin, it turns out, isn’t done with Rockdale; several companies are investing hundreds of millions there, taking advantage of electrical infrastructure left behind by Alcoa, a Pittsburgh-based aluminum company that at one time employed two thousand residents of the town. Earlier this month, the Bitcoin mining company Riot Blockchain signed a deal to buy Whinstone US’s Rockdale mining operation for $651 million in cash and stock. Texas now has the largest Bitcoin mining presence of any state.
Meanwhile an industry lobby calling itself the Texas Blockchain Council, which launched in November, is pushing state legislators to make Texas more blockchain-friendly. At least four bills introduced in the Texas House and Senate this spring are being promoted by the Council, whose members include Richardson-based Hadera Hashgraph, Ohio-based Hyland Software, and Austin-based Trammell Ventures.
One of the bills would make Texas only the second state in the U.S. to establish a Uniform Commercial Code amendment. The measure, similar to one passed in Wyoming in 2019, affirms digital currencies such as Bitcoin as valid for commercial transactions. At least one critic points out that the bill, as written, doesn’t do enough to establish what happens when real-world liens are enforced against someone’s virtual-currency assets.
Working directly with the Blockchain Council has been state representative Tan Parker of Denton County, who has been a vocal proponent of blockchain technology for the past several legislative sessions. “What we’re doing with the crypto bill is to put in place a framework that will enable Texas to be able to lead the country in these digital currencies,” Parker said. “There are a couple of smaller states that have gotten into the crypto space, but it is my hope and aspiration this session that Texas will assert its leadership in this domain.”
Parker also echoed recent comments by California congressman Kevin McCarthy on the national-security implications of cryptocurrency and Bitcoin mining, particularly with regard to China’s dominance in the industry. “We as an American people have to engage with these digital currencies. They are instrumentally important to the economic and, I would argue, national security interest of the United States,” Parker said.
The other related bills that have been introduced would establish blockchain-anchored electronic signatures, such as those used on digital contracts, as legally valid in Texas, and create working groups of legislators and industry leaders to consider how blockchain technology might be put to use by the state. None of the measures have yet come up for a full floor vote, but they remain under consideration by House and Senate committees.
As early as 2014, some lawmakers were making efforts to make the state more crypto-friendly, but Texas doesn’t have a history as a blockchain leader. In 2018, the Brookings Institute listed the state as “reactionary” on blockchain technology, saying it had taken a cautious, even negative, attitude toward cryptocurrencies. Yet Texas’s relatively cheap electricity has led to the mining boom, which in turn has garnered additional support from politicians, including Governor Greg Abbott, to make Texas a Bitcoin leader.
The blockchain business has attracted such interest that earlier this month, Texas A&M University attracted more than 1,600 attendees to its two-day Bitcoin Conference, with topics ranging from “Bitcoin Law, Policy, Taxation” to “Crypto Hedge Funds” and “Aggies in Bitcoin.” Korok Ray, director of A&M’s Mays Innovation Research Center at the Mays Business School, said the conference proved successful because interest in the sector has spiked. “Bitcoin mining in Texas is particularly promising, given our global advantage in energy supply,” he said.
Texas Blockchain Council president Lee Bratcher, who is also a professor specializing in blockchain technology for real estate at Dallas Baptist University, touts the economic opportunities of blockchain, especially for mining towns such as Rockdale. “These are like the twenty-first-century versions of blue-collar jobs. These folks are getting paid $20-plus an hour, with 401(k)s and benefits. Everything about this excites me,” he said. “I’m really amped up because it’s good for Texas. It’s good for our economy. It’s good for the people.”
In Milam County alone, where Rockdale is located, local officials estimate there are at least a few hundred jobs in crypto mining, and that those numbers could grow as more prospectors come to stake their claims. Based on his conversations with miners, Bratcher estimates that there are about five or six large-scale mining operations and more than twenty small-scale mines across Texas, including in the Rockdale area, though some keep a low profile and don’t publicize their operations.
Bratcher has been working closely with some of these mining entrepreneurs to offer legislators tours of their operations, including those near Rockdale operated by Rhodium Encore. Rhodium’s 27-year-old CEO Nathan Nichols, who’s been in the Bitcoin mining business for four years, says his company is the largest customer for Whinstone’s three 60,000-square-foot mining facilities in Rockdale, with a fourth in the works, and another facility elsewhere in Texas due to break ground in June. He wouldn’t disclose its location due to the competitive nature of the Bitcoin mining trade. With Whinstone as its site provider, Rhodium has access to about eight hundred megawatts of power.
Both Bratcher and Nichols are quick to downplay significant environmental concerns about Bitcoin mining or worries that another bust in the currency’s value could cripple the small towns where companies are hiring employees to build out facilities, maintain them, or provide services such as plumbing or technical maintenance.
Yet critics like financial columnist and Digiconomist website founder Alex de Vries say Bitcoin mining’s current reliance on fossil fuels such as coal, especially in places like China, and the electronic waste it creates in the march for faster, better computers, is a “horrid reality.”
“Bitcoin is quite the energy hog,” de Vries said. “If you look at the carbon footprint of the Bitcoin network as a whole, we estimate it to be in the range of a country like Hong Kong or Portugal.” The rising value of Bitcoin has greatly increased the mining and its demand for energy. Only a shortage of microchips due to the pandemic has slowed that rollout. “In a country like Abkhazia, they came in such big numbers that the whole country has seen rolling blackouts for months,” de Vries adds.
Nichols and Bratcher said Bitcoin miners are trying to work with energy companies for solutions such as using natural gas flaring as energy for their operations, or turning to solar or other renewable sources. A video out of Texas posted on Twitter that went viral in February showed a Bitcoin mining operation set up near a traditional oil well powering a generator. The miners claim this makes them part of the climate-change solution, by using energy (the natural gas byproduct) that would otherwise go to waste. De Vries sees it differently: “I don’t see it as a good thing to make a byproduct of fossil fuel extraction more profitable or profitable at all. It’s still producing emissions.”
Green concerns aside, there’s also the question of what happens if there’s another severe drop in the cryptocurrency’s value. Some watchers of the industry point to past Bitcoin crashes that wiped out as much as 93 percent of the currency’s value, and say it could happen again. Still, Bratcher claims that Bitcoin mining won’t go away even if Bitcoin crashes substantially.
“The way the Texas mining community is set up, they are profitable even with a substantial decline in the price of crypto and Bitcoin,” Bratcher said. “They were profitable when Bitcoin was $10,000. So those jobs are here to stay, and yeah, I think the narrative about them being rural jobs is really, really cool.”